RAC Inoculation

Karen Bowden, August 20, 2009

CMS created the Recovery Audit Contractor (RAC) program as part of an effort to reduce improper Medicare payments by contracting independent auditors to detect and collect overpayments. The auditors are also charged with identifying underpayments, although during the RAC demonstration phase, about 25 times more overpayments were collected than underpayments paid ($980 million versus $37.8 million).

The demonstration project, which ended its three-year process in March 2008, is the best body of evidence we have to project what the permanent program will be like. The permanent program continues to roll out across the country, with the goal of having all four RAC regions, each responsible for one-quarter of the country, fully operational by 2010. Hospitals and other healthcare organizations interested in preserving their Medicare revenue—including already billed and collected funds—would do well to study the demonstration and learn as much as they can to prepare for a future where RAC audits will soon become an unavoidable reality.

You can do the following to protect your organization from RAC auditors:

Be forewarned. Assessing your risk is an important first step to understanding how big of a problem RAC could be for you. Review historic claims against RAC findings to get a ballpark estimate of how your organization would fare in an audit.

Be efficient. As you build your RAC processes, focus on efficiency in your work flows, reuse documents wherever possible, and always be on the lookout for ways to streamline your processes. New RAC work flow and documentation tools are coming to market now that can help.

Be aware. RAC correspondence is often sent to the hospital's general delivery mailbox, and many organizations are not set up to alert the right people as soon as this occurs. Payment retraction can be halted if FI-level appeals are filed within 30 days and QIC-level appeals within 60, so make sure your staff is trained to spot these letters immediately.

Be persistent. We see no reason not to appeal all the way to the Federal District Court level until standards emerge for what denials will and will not be overturned and why, especially when it comes to large-value claims.

Be consistent. Many billing organizations find themselves torn between clinicians seeking to provide the safest, highest-quality standards of care on one side and RAC auditors making them pay for exceeding basic thresholds of quality on the other. We are working with several organizations to write their own RAC rulebook, setting out well-substantiated standards of care for the organization and using that document to fend off both groups. The idea is to make internal and external organizations prove their case against your evidence.

Editor's note: Bowden is the president of consulting services at ClaimTrust, Inc. She may be reached at kbowden@claimtrust.com. This article was adapted from one that originally appeared in the August 2009 issue of Health Governance Report, a HealthLeaders Media publication.
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